Brent crude dropped to its lowest level in over two years amid concerns that demand will reduce due to poor economic growth in China.
According to China’s National Bureau of Statistics, the output of the second-largest oil consumer grew at the slowest pace since global financial crisis.The International Energy Agency cut its global oil demand projections due to weak growth in Europe and China.
Tradition Energy analyst and broker, Gene McGillian said, “The market is factoring in slowing economic growth in China and Europe. We seem to have concerns about the economic conditions and the idea that we have more than ample supply.”
Bloomberg reported that October settlement Brent, expiring today, dropped 0.4% or 41 cents to $96.70 per barrel on London’s ICE Futures Europe exchange. It had reached $96.21 per barrel earlier, the lowest since July 2 2012. November contract dropped to $97.67 by 29 cents. The volume of the traded futures was 17% less than the 100-day average.
October delivery WTI dropped 0.4% or 34 cents to $91.93 per barrel on New York Mercantile Exchange. The volume was 27% above the 100-day average. Brent premium was at $4.77 to WTI, after settling on September 12 at $4.84.
Reuters quotes Tamas Varga, PVM oil analyst as having said, “Struggling global economic growth has resulted in falling growth in global oil demand.” He added that the concerns over conflict in Russia, Middle East and North Africa did not affect supply.
Last week, the European Union and United States imposed new sanctions on Moscow, which hamper the exploration of the huge shale and Arctic oil reserves in Russia.
In a report, the IEA wrote, “After months of anaemic Chinese oil demand growth, it is becoming ever clearer that even with an assumed uptick in 2H14, Chinese oil demand growth will struggle to get much above 2%.”
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